Race-To-The-Bottom Tariff Cutting
This paper provides an empirical assessment of race-to-the-bottom unilateralism. It suggests that decades of unilateral tariff cutting in Asia?s emerging economies have been driven by a competition to attract FDI from Japan. Using spatial econometrics, I show that tariffs on parts and components, a crucial locational determinant for Japanese firms, converged across countries following a contagion pattern. Tariffs followed those of competing countries if the latter were lower, if FDI jealousy was high, and when competing countries were at a similar level of development.
|Date of creation:||Jul 2010|
|Date of revision:||Jul 2010|
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